Can you get a tax deduction from working in a coworking space?
The modern workplace has evolved significantly, with many independent workers and businesses investing in coworking memberships for more flexibility and fewer expenses. Cost savings are one of the most attractive benefits that coworking spaces offer since leasing a traditional office requires long-term contracts and additional furniture and supplies.
With that said, many may not realize that coworking spaces also come with tax benefits that you can enjoy every year. So, are coworking spaces tax deductible? Read on to learn more about the tax implications of using a shared office, so you get a better idea of how moving into a shared office will affect your finances.
Tax Deductions from Coworking Spaces
To start, you might be wondering, are coworking spaces tax deductible? The good news is that they are! Suppose you are a freelancer, remote worker, solo entrepreneur, or independent contractor. In that case, you can include the costs of using a coworking space in your tax deductibles since they also count as renting an office space.
Generally, you can deduct most expenses incurred in the space, including the following:
- Coworking membership fee
- Costs of renting a meeting or conference rooms
- Printing costs and other miscellaneous fees related to work
- Costs of networking events
Technically, even if you work from home, you can still deduct part of your rent or mortgage under the “Rent” item on your tax returns form. However, to qualify for the home office deduction, you need to ensure that the expenses are over 2% of your adjusted gross income. The tricky part here will be calculating the exact square footage that you will use as your home office, especially if you do not have a dedicated space to work at home.
Using a Coworking Space Occasionally vs. Regularly
Now that you know the answer to the question, are coworking spaces tax deductible, it is also important to understand the differences in tax treatments based on how you use your coworking space.
If you only use a coworking office regularly and pay a one-time rate each time, you can deduct this as an office cost. However, occasional means that you do not spend most of your time working in the coworking space. One common example will be meeting with clients from time to time. Under this arrangement, you can also deduct your commute fees as an expense in these situations.
On the other hand, if you use shared office spaces permanently or full-time, you can still deduct your expenses as office costs. However, commute and travel fees will not be included in your deductibles. There may be some exemptions to this, but it would be best to ask a tax professional for help.
Independent Workers vs. Employees
Employees do not receive the same treatment as independent workers like sole proprietors or freelancers, so there are also differences in how they treat coworking spaces in their taxes. For example, as mentioned earlier, you can deduct your home office expenses in your Schedule A, but they need to be more than 2% of your adjusted gross income.
In most cases, employees who work remotely in a coworking space may not get as many deductions as independent workers. It can be hard to understand the exact details, so make sure you speak with a professional to explain what you can include in your forms.
So, are coworking spaces tax deductible? Yes, they are the exact calculations can vary on a case-to-case basis when it comes to the technical details. You should consult a tax professional to ensure that you follow the IRS rules correctly.
Start Renting a Coworking Space Today
Overall, a coworking space is tax deductible, which allows you to enjoy even more benefits than you initially thought. If you are interested in coworking memberships, 4&Co. offers a range of options to fit varying needs and budgets. Contact us today at (727) 725-2745 to plan your visit and learn more about our memberships and coworking spaces in Clearwater and Pasco.